Free Practice Questions for Insurance Licensing NY-Life-Accident-and-Health Exam

The correct answer is B. The growth of the policy’s cash value is not subject to income tax while the policy is in force. Whole life insurance is a form of cash value life insurance . As premiums are paid, part of the premium funds the death benefit and expenses, while part builds cash value inside the policy. Under standard life insurance taxation principles, that internal cash value buildup generally grows on a tax-deferred basis , meaning it is not taxed annually while it remains within the policy. The NAIC explains that whole life policies build cash value over time and that this value grows without being taxed currently, and IRS guidance similarly distinguishes taxable situations from ordinary in-force policy growth.

The other choices are incorrect. A is wrong because whole life cash value is not normally taxed each calendar year. C is more characteristic of variable life , where values fluctuate with investment performance. D is incorrect because traditional whole life generally provides guaranteed minimum cash values under the contract, subject to policy terms and continued premium payment; New York DFS whole life product guidance reflects that whole life operates on a guaranteed basis and includes cash surrender value provisions.

In group medical insurance, the insurer issues one main contract to the sponsoring entity—commonly an employer—covering the eligible group of employees. This single contract is called the master policy . The employer (or group sponsor) is the policyholder of the master contract, and it contains the controlling provisions: eligibility rules, benefits, limitations, exclusions, premium requirements, renewal provisions, and administrative terms.

Employees covered under the plan do not usually receive their own individual policies. Instead, each insured employee receives a certificate of insurance (sometimes called a certificate), which summarizes the essential coverage provisions and the benefits available to that employee under the master policy. The certificate is evidence of coverage, but it is not the controlling contract; the master policy governs.

Option A (“group policy”) is a generic phrase and can refer broadly to group insurance, but the specific term for the single contract issued to the employer is master policy . Option C is not a standard insurance term, and option D is incorrect because a “certificate” is issued to employees, not as the primary contract.

The correct answer is B. Employee. In group health insurance, the master policy is issued to the policyholder or sponsor , which is typically the employer or organization sponsoring the plan. Individual members of the group—usually employees—are not issued the master policy itself. Instead, they receive a certificate of coverage that summarizes the benefits, limitations, and procedures for obtaining benefits under the group plan. This certificate serves as the individual’s proof of insurance coverage .

Under group insurance arrangements, each insured participant receives a certificate explaining the coverage provided under the master contract and outlining the essential features of the insurance. ( app.achievable.me )

The other options are incorrect because the sponsor or employer receives the master policy , not the certificate of coverage. The HMO or insurer is the entity providing the coverage and issuing the documents, not the party receiving the certificate as proof of coverage. Therefore, when health insurance is marketed to groups, the employee (or covered member) is issued a certificate as evidence of insurance coverage .

The correct answer is reaches age 26 . The Affordable Care Act (ACA) introduced a major change in health insurance dependent coverage rules by requiring most health insurance plans that provide dependent coverage to allow children to stay on their parent’s health insurance policy until they reach age 26 . This rule applies to both individual and employer-sponsored health plans .

One important feature of this regulation is that eligibility does not depend on the child’s marital status, student status, financial independence, or residence . This means a young adult may still remain covered under the parent’s plan even if the child is married, living independently, or no longer attending school. The goal of this provision is to reduce the number of uninsured young adults who may otherwise lose coverage after finishing school or aging out of traditional dependent eligibility requirements.

The other options are incorrect because dependent coverage does not automatically end when the child marries, graduates from college, or turns age 19 . The ACA clearly sets the maximum age for dependent coverage at 26 years old , making Option C the correct answer.

Because the owner’s physician, accountant, and insurance consultant are all specifically barred from receiving such referral compensation, the only correct option is D. life settlement broker .

The correct answer is A. A time deductible rather than a dollar deductible. In disability income insurance, the elimination period is the span of time that must pass after a covered disability begins before benefits become payable. Instead of requiring the insured to first pay a certain amount of money out of pocket, as with a traditional health insurance deductible, disability coverage usually requires the insured to satisfy a waiting period measured in days . For this reason, the elimination period is commonly described as a time deductible .

This period helps the insurer avoid paying for very short-term disabilities and affects the policy’s premium structure. In general, the longer the elimination period, the lower the premium , because the insured waits longer before receiving benefits. Common elimination periods may be 30, 60, 90, or 180 days depending on the policy. The other choices are not as accurate. It is not a benefit period , because the benefit period describes how long payments continue after they start. It is not a dollar deductible , and although “qualifying period” may sound similar, the standard licensing term used in disability insurance is elimination period , meaning a time deductible .

The correct answer is A. mutual company . A mutual insurer is an insurance company that is owned by its policyholders rather than by outside stockholders. Because the policyholders are the owners, they may share in the insurer’s favorable operating results through the payment of dividends , when declared by the company. These dividends are not guaranteed and are generally considered a return of excess premium rather than taxable income in the usual licensing context.

The other choices do not match this ownership structure. A stock company is owned by its stockholders , and while it may issue participating policies in some cases, the company itself is not owned by policyholders. A reciprocal exchange is an unincorporated association in which subscribers insure one another through an attorney-in-fact, which is a different legal arrangement. A fraternal society is typically a nonprofit organization providing insurance to members with a common bond and lodge system, not a standard policyholder-owned insurer in the same sense as a mutual company.

For exam purposes, “owned by policyholders” and “may pay annual dividends” directly identify a mutual company .

The correct answer is age beyond which premiums will no longer be required . A limited-payment life insurance policy is a form of permanent life insurance designed so that the insured pays premiums for only a specified period of time , rather than for their entire lifetime. The limitation refers either to a fixed number of premium payments (for example, 10-pay or 20-pay life) or to a specific age at which premium payments stop , such as Life Paid-Up at Age 65. After the required premium period ends, the policy remains fully in force for the remainder of the insured’s lifetime , and the death benefit continues without any additional premium obligations.

This structure is attractive to policyholders who want to complete their premium payments during their working years and avoid paying premiums later in life, such as during retirement. Although premiums for limited-payment policies are typically higher than those for ordinary life policies , they allow the policy to become fully paid-up earlier .

The other choices are incorrect because limited-payment provisions do not limit policy benefits, policy loan amounts, or the interest credited to policy cash values. The limitation strictly concerns the duration of premium payments .

The correct answer is 6 months . A Medicare Supplement policy , also known as Medigap , may impose a waiting period for coverage of a preexisting condition , but that exclusion period is limited. Under standard Medicare Supplement rules, an insurer may exclude coverage for a preexisting condition for no more than 6 months after the policy’s effective date. A preexisting condition generally refers to a condition for which medical advice was given or treatment was recommended or received within a specified period before coverage became effective.

This rule is intended to protect applicants while still allowing insurers limited control over immediate claims related to known medical conditions. In many cases, this exclusion period can also be reduced or eliminated when the applicant has had prior creditable coverage with no significant break in coverage. That is why Medicare Supplement regulations are often tested together with rules about replacement, guaranteed issue, and continuity of coverage.

The other options—12 months, 18 months, and 24 months—are too long for a Medicare Supplement preexisting condition exclusion period. For exam purposes, the maximum exclusion period on a Medigap policy is 6 months , making Choice A correct.

The correct answer is reaches age 26 . Under the Affordable Care Act (ACA) , health insurance plans that offer dependent coverage must allow children to remain on their parent’s health insurance policy until age 26 . This rule applies regardless of several factors that previously affected eligibility under older insurance plans. For example, the dependent child does not need to live with the parent, be financially dependent, be a student, or be unmarried to remain eligible for coverage under the parent’s policy.

This provision was introduced to expand access to health coverage for young adults, who historically had higher uninsured rates when transitioning from school to the workforce. As a result, individuals can remain on their parents’ employer-sponsored or individual health plans until their 26th birthday , even if they are married or no longer living at home.

The other options are incorrect because the ACA does not terminate dependent coverage based on marriage , graduation from college , or age 19 . The uniform federal rule established by the ACA is that dependent coverage must be available until age 26 , making Choice C the correct answer.

The correct answer is 6 months . In life insurance, backdating an application or policy means using an earlier policy date than the actual date of application or issue. This is commonly done to preserve a younger insurance age , which can result in a lower premium for the insured. The standard rule tested in life insurance licensing materials is that a life insurance policy may be backdated up to 6 months .

This rule is especially important when an applicant is close to a birthday that would place them in a higher age bracket for premium calculation. By backdating within the permitted limit, the insurer may allow the applicant to be rated at the younger age, although the applicant must usually pay premiums retroactive to the earlier effective date.

The other options are incorrect because they do not reflect the commonly tested maximum backdating period. Two weeks and three months are too short, while one year exceeds the permitted limit. For exam purposes, when asked how far a life insurance application or policy may be backdated, the recognized answer is 6 months , making Choice C the correct response.